If the demand for a product remains the same and the supply falls,
A) the market clearing price will fall and the equilibrium quantity will rise.
B) the market clearing price will rise and the equilibrium quantity will fall.
C) both the market clearing price and the equilibrium quantity will fall.
D) both the market clearing price and the equilibrium quantity will rise.

Question

Quizplus · Accepted Answer

If the supply falls while demand remains constant, there will be a shortage in the market, which means that buyers will compete with each other to purchase the limited available quantity of the product. As a result, the market clearing price will rise, and the equilibrium quantity will fall. This is because the higher price will discourage some buyers from purchasing the product, while at the same time attracting some additional sellers to enter the market, which will increase the supply slightly. The market will continue to adjust until the price reaches a level where the quantity demanded equals the quantity supplied.

If the Demand for a Product Remains the Same and the Supply